Leather Pipeline: Do buyers understand the cost of manufacturing leather?

The latest edition of our Leather Pipeline market intelligence report brings news that leather buyers are becoming increasingly demanding of their suppliers, with tanners said to be facing “massive” price pressure from their clients.

It warns that the hide selections deemed unsuitable by customers are no longer just low-grade ones. They are also making more demands with regards to the specifications of the materials they are buying. The lack of prospective buyers and the level of competition means tanners are now being forced to bend to these demands, even if it does not make sense for their overall business position.

The report says many tanneries are complaining about the price pressures being put on them. It describes the combination of falling raw material prices and competition as “a lethal cocktail when it comes to price negotiations”.

It also questions whether the buyers applying this unfair price pressure even understand the basic calculations involved in leather manufacturing.

“When we listen to the comments and arguments at the negotiation table, we recognise the low level of common understanding in many cases,” the Leather Pipeline says, adding that it appears few leather buyers seems to appreciate the service their suppliers offer.

It adds: “The fundamental belief that almost every supplier can be replaced is so strong that even basic calculations are no longer being made. It is not rocket science to figure out where the bottom price level for a square foot of finished leather is.”
The full report is available here.

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